Supermarket owners and importers are facing government pressure to reduce the recommended prices of a range of staple grocery products by up to 15 per cent starting this month, as inflation continues to bite.  

Industry insiders say operators are being asked to lower the recommended retail price (RRP) of products such as tea, coffee, long-life milk, pasta and tinned tuna, among others.

At least two major supermarket chains have signed up to the agreement.

The reductions – which are thought to cover hundreds of products – are expected to take effect from January 15 and stay in place until the next budget announcement in October.  

Inflation has consistently topped people's concerns in the last 18 months or so as prices of staple items from supermarkets kept rising. Operators say shipping costs and the impact of the Ukraine war are mainly to blame forcing families to trim grocery budgets or shift to cheaper products. 

But sources in the industry fear that the move will backfire as operators will "probably" inflate the prices of other products to make up for any potential losses in the stipulated discounted items.

While the RRP does not equate to the price at the till, it represents the maximum price that can be charged for an item. So, the closer to the RRP a retailer charges, the more of a reduction they will be forced to make. One retailer said they already pricing several items below RRP.

Despite fears the move could hit smaller retailers harder, since they are not able to take advantage of economies of scale to offer discounts in line with larger retailers, one source said the move will only impact businesses with a turnover above €4 million.  

And while the price cuts may come as good news to shoppers, there is industry anger at what insiders say is the government forcing the move on the sector and fears it could put operators in the position of breaking the law, which prohibits price fixing.  

Sources say the agreements are being pushed by Economy Minister Silvio Schembri, who they say is planning a publicity campaign later this month to promote the move as a victory. 

But insiders worry the campaign could be tantamount to a ‘name-and-shame' exercise, with retailers who have not signed up to the scheme published alongside the names of those who have.  

Economy Ministry has contacted operators directly

Sources say the Economy Ministry has contacted operators directly to secure agreements, pressuring others to join the scheme rather than risk any damage to their reputation.  

Contacted on Thursday, Schembri told Times of Malta he had been speaking about the cost of imported products in parliament since November.

Confirming discussions were at an "advance stage", Schembri said he had received "positive feedback on what the government is trying to achieve", and that businesses were being cooperative in the discussions. 

However, he said it would be "premature" to release further details about the scheme at this stage.

One source said that while operators were not opposed to the idea per se, they rejected the government's “take it or leave it” approach. 

“The government will look like it’s achieving miracles and bringing bad operators in line, but that’s simply not the case,” the source said.  

They explained that businesses operating a discount-store model could choose not to join the scheme due to already offering bigger savings on quoted RRPs than the planned reductions, but still be painted in a bad light for not signing up. 

The source added that despite negotiations having been ongoing for over a month, there were still doubts within the business community as to whether the discussions or possible agreements were in breach of anti-trust legislation.

It is understood the planned 15% reduction to RRPs will be shouldered by both suppliers and retailers, with the former required to reduce their prices to help cushion the blow dealt to retailers. 

Sources said that while around one-third of costs will be borne by shops, around two-thirds will fall on distributors. 

While Times of Malta has not been able to confirm a list of which businesses have agreed to the move, when contacted, Welbee's CEO Jonathan Shaw confirmed the supermarket chain would be included in the scheme.  

"Welbee's are going to be a part of it, but I think it prudent that further details come from the minister himself," said Shaw. 

Malcolm Camilleri, deputy CEO of PG Group - which owns PAMA and PAVI supermarket chains -  also confirmed the supermarkets had signed up to the agreement. 

The move comes days after Prime Minister Robert Abela pledged increased measures to tackle the rising cost of living. Stressing the government should not contribute to a rise in inflation, he said it would continue working with stakeholders to combat the issue.  

Meanwhile, in October, Labour MEP Alex Agius Saliba asked the European Commission to investigate Maltese food importers for anti-trust violations. 

This claim was rejected by importers who said higher prices reflected the increased difficulties of importing food items to the country.